U.S. businessman Jerry Zucker has made a play to take over Hudson's Bay Co. in a deal that values Canada's oldest company at $1 billion, but his company denies it's planning to gut the troubled retailer.

HBC's stock shot up more than 21 per cent on the Toronto Stock Exchange late last week as investors buzzed about a possible higher bid and the department store chain's board said it would assess the "unsolicited" offer from Zucker, the company's biggest stockholder.

"The board will make a recommendation to shareholders and advise the market accordingly," the company said in a statement, but offered no timelines on when it will consider the deal.

Zucker's Maple Leaf Heritage Investments, the Bay's biggest shareholder with just under 19 per cent, tabled its offer for $14.75 a share, plus debt.

The surprise bid was worth about $832 million and valued the entire Toronto-based department store company at just over $1 billion.

Hudson's Bay (TSX:HBC) is Canada's largest department store chain with more than 500 outlets led by The Bay, Zellers and Home Outfitters chains. It employs about 70,000 people across the country, but has produced poor financial results for years, in part because of competition from Wal-Mart Canada, other discounters and big-box specialty clothing chains.

North America's retailing sector has been in flux for years in the wake of intense pricing pressures from Wal-Mart, the world's biggest company and a cutthroat competitor.

In the United States, the industry has been rapidly consolidating with recent mergers of Sears and K-Mart along with Federated and May Department Stores. In Canada, Eaton's, K-Mart Canada, Woolco, Dylex and other companies have disappeared.

The offer sent Hudson's Bay shares (TSX:HBC) up $2.72 to close at $15.35 - above the takeover price - on the possibility that Zucker may raise his bid if he gets a chance to thoroughly review the company's books or if a rival bid emerges.

"We think it is a very fair price but if the company is willing to sit down with us and share non-public information, I think we may be able to find additional value," says Robert Johnston, Zucker's spokesman and vice-president of strategy at South Carolina-based Maple Leaf Heritage Investments.

The $14.75 bid is 38 per cent above its price in December 2003 when Zucker first disclosed he had accumulated a significant holding in the company.

But industry watchers say competing offers could emerge from U.S. department store operators such as Federated or Target, Canadian pension funds or investors such as Kohlberg Kravis Robert & Co. of New York.

The Wall Street buyout firm owns part of the Yellow Pages income fund and made a hefty profit from its initial investment in Shoppers Drug Mart, Canada's largest drug store chain.

David Brodie, an analyst with Research Capital Corp., says Zucker appears to be lowballing the value of Hudson's Bay.

"Everybody knows their book value is around $30 (per share), so this is like less than half of book value," Brodie says. "So the question is, will anybody surface to pay more?" Retail consultant Maureen Atkinson, senior partner at the J.C. Williams Group Ltd., speculates that given Zucker's reputation as a veteran takeover artist, he is likely more interested in the company's real estate and other assets rather than pure retailing.

Some observers have estimated that Hudson's Bay's real-estate assets have a net worth of about $100 million.

"Even beyond that, they do have Club Z, which is a huge (customer loyalty) program," she says.

A future real-estate sale, massive layoffs, store closings and a merger with arch-rival Sears Canada all remain within the realm of possibility, she says. "I think everything is up for grabs."

But Johnston says Zucker's aim is to improve the retailer's financial performance, which has been lacklustre in recent years due to sharper competition from specialty shops, big-box discounters and Internet retailers.

"We have no plans for any major shakeup at this point," Johnston says, adding there are no plans yet for a major restructuring or layoffs, adding it's "too early" to speculate on a possible management shakeup.

Heritage, he adds, remains generally supportive of Hudson's Bay's five-year plan to improve its financial performance but believes it could use some tweaking, particularly in the areas of inventory, advertising, discount buys and the sale of big-ticket items such as appliances and electronics.

Says Johnston: "With the last couple of quarters, not only were the results disappointing, but the visibility in to the future has been murky."

Accelerating Zucker's decision to act, was HBC's announcement last month that it is mulling a sale of its lucrative credit-card division.

While HBC'S stock received an initial lift from the news, it was unable to sustain that rally, prompting Zucker to worry "the investment community doesn't expect this to be a high-price sale for a crown jewel."

Maple Leaf Heritage, wholly owned by Zucker's B-Bay Inc., already owns 18.8 per cent of Hudson Bay Co., which has been in business since 1670 after pioneering in the fur trade.

Zucker has arranged $1 billion in financing through Wells Fargo and ABN Amro banks.

HBC now has 10 days to turn over its shareholder list.